Tuition fees: Blunkett should do more homework

Former Secretary of State for Education David Blunkett wrote a piece for the Guardian last week, arguing that instead of cutting university tuition fees, the government should reduce the interest rate that applies to the loans that cover repayment of the fees.

I am not going to argue one way or another when it comes to fees. It’s a complex issue. However, Lord Blunkett’s mathematics don’t quite add up, and the article contains at least one glaring error. I have previously written an explanation of the student funding system, which has changed little since it was proposed in 2010.

Lord Blunkett makes the point that a cut in fees would damage some university departments, a claim I have no issue with, and maybe that alone is a reason not to cut fees. However, the remainder of his argument is flawed. He claims that a cut in fees would only benefit (my emphasis) those students who currently pay off their full loan before the 30-year time limit, when any remaining loan is written off. On the other hand, he says a reduction in the interest rate that is charged from the current 6.3% would increase the likelihood of the total amount being repaid.

While 6.3% sounds high in the current period of exceptionally low interest rates, can it really be claimed that cutting this rate has a significantly bigger effect on repayments than reducing the amount borrowed by nearly a third? This is actually not straightforward to calculate as it is necessary to make assumptions about future inflation rates and rises in earnings. However, cutting the original loan amount certainly means that some people who currently would not repay the loan would do so, as the initial amount is smaller, and the amount on which interest is accrued is smaller. Therefore, cutting fees would benefit some people who do not currently pay off their loans in exactly the way that cutting interest rates would.

Lord Blunkett focuses on low earners in his article, and this is where he really should have done his homework. The 6.3% rate already only applies to graduates who earn more than £45,000 – not a small amount. Lower interest rates apply to lower earners, but this is conveniently omitted from the article.

The other glaring error is that the article claims graduates repay their loans by paying 9% of their income each year. This is incorrect, although whether it was really what David Blunkett wrote, rather than a Guardian subediting error, is anyone’s guess. The repayment is 9% of income over £25,000. So someone earning £30,000 pays £450 per year, or 1.5% of their income. And someone earning £25,000 pays nothing. This is the same whatever interest rate applies to the loan. The idea was never that students all paid off their loans, but this is the crucial point that so many people fail to understand.

The tuition fee system is far from perfect, and I wouldn’t like to be the one tasked with sorting it out. However, it doesn’t help when commentators and people in the public eye continue to spread misinformation about it. I grade the former education secretary’s article C- at best.

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